Unusual Options Activity Review for Thursday, December 6, 2012
Thursday’s Bullish Trading
Nokia (NOK) calls were busy Thursday. Shares, which jumped nearly 13 percent Wednesday after the company signed a deal with China Mobile to sell Nokia’s Windows-based Lumina 920, gave back 13 cents to $3.75. Meanwhile, an impressive 109,000 calls and 13,000 puts traded in Nokia Thursday. Nearly half of the volume was in the Jan 2014 calls at the $7 strike. Roughly 49,000 contracts traded against 35,000 in open interest. The largest trade was a 22,000-contract block for 38 cents per contract on the International Securities Exchange. An investor bought the block of calls, to open, according to data from the exchange. If so, the positioning seems to express a bullish view on NOK for 2013. The contract expires on January 18, 2014 and is currently 86.7 percent out-of-the-money.
Bullish trading was also seen in Walter Energy (WLT), MGM, and Safeway (SWY).
Thursday’s Bearish Trading
Green Mountain Coffee Roasters (GMCR) shares dropped 8.2 percent to $37.78, but with no obvious headlines on the ticker to explain the big drop Thursday. Shares had surged more than 75 percent in less than three weeks prior to Thursday. So, perhaps a round of aggressive profit-taking is partly to blame for the stock’s relative weakness. Options on the coffee producer were very busy as well. 63,000 calls and 68,000 puts traded on GMCR. Weekly downside 36 and 36.5 puts, which expire at the end of next week, were the most actives. There is no existing open interest in those puts and some investors were possibly taking positions in those freshly-listed contracts on concerns about additional losses for GMCR in the days ahead.
Bearish trading was also seen in Tellabs (TLAB), VM Ware (VMW), and NRG.
Index Recap
Overall volumes in the index market slowed again Thursday and could continue to remain at subdued levels through the remainder of the year, as the second half of December is a seasonally slow period for financial markets. Only 402,000 calls and 533,000 puts trades across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash index products. The S&P 500 ticked 4.66 points higher to 1,413.94 and VIX, which tracks the expected or implied volatility in SPX options, edged up .12 to 16.58. Overall volumes in the VIX pit were very light. 157,000 calls and 108,000 puts, which is only half the average daily volume for the product, according to Trade Alert data. Light volume in the index market is due to seasonal factors, but seems to reflect a lack of real hedging or protective put activity among portfolio managers Thursday.
Analyzing the ETF Market
iShares Emerging Markets Fund (EEM) saw a second day of noteworthy options order flow. As noted in Wednesday’s report, a hefty Jan 43 ? 47 call spread traded on the ETF. Shares edged up 32 cents to $42.66 Thursday and 135,000 calls and 71,000 puts traded in EEM. December 44 calls, which are now 3.1 percent out-of-the-money and expiring in 2 weeks, were the most actives. Nearly 30,000 traded. January 42, January 43, and January 45 calls were the next most actives. Meanwhile, implied volatility in EEM, as measured by VXEEM, dropped .20 points to 21.80. The EEM implied volatility index is now down 10.5 percent since mid-November. Higher call activity in EEM and falling VXEEM seems to reflect some bullishness (complacency?) among some investors towards global emerging markets.
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